The production manager of a company was experiencing high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided to purchase a higher grade of material which would be more reliable, but he was worried that the cost of the new material might negatively impact operating income. This situation could have produced which of the following variances?

Question

Quizplus · Accepted Answer

Purchasing a higher grade of material typically results in an increase in the cost per unit of material, leading to an unfavorable materials price variance because the company is paying more than originally planned or budgeted for the materials.

The Production Manager of a Company Was Experiencing High Defect